MNCs

ADVANTAGES OF MNCs

Multinational corporations (MNCs) bring several advantages to both the countries they
operate in and to the global economy as a whole. Here are some key points explaining
these advantages:

​ Job Creation: MNCs often create employment opportunities in the countries

where they establish operations. This can range from low-skilled manufacturing
jobs to high-skilled positions in research, development, and management.
​
​ Transfer of Technology and Skills: MNCs often bring advanced technologies
and skills to the countries where they operate. This can help to upgrade local
industries, improve productivity, and foster innovation.
​
​ Economic Growth: By investing in new facilities, infrastructure, and
technologies, MNCs contribute to the overall economic growth of the countries
where they operate. This growth can have a positive impact on the standard of
living and quality of life for local residents.
​
​ Access to Global Markets: MNCs provide local businesses with opportunities to
access global markets through partnerships, supply chains, and distribution
networks. This can help local companies expand their reach and increase their
competitiveness.
​
​ Increased Tax Revenue: MNCs generate tax revenue for the countries where
they operate through corporate taxes, employee taxes, and indirect taxes. This
revenue can be used to fund public services such as education, healthcare, and
infrastructure development.
​
​ Fostering Cultural Exchange: MNCs facilitate cultural exchange by bringing
together people from different backgrounds and countries. This can lead to
greater understanding, tolerance, and cooperation between nations.
 ​ Risk Diversification: MNCs often operate in multiple countries and regions,
which can help to diversify risk. This can be beneficial during times of economic
uncertainty or geopolitical instability.
​
​ Efficiency and Economies of Scale: MNCs can achieve economies of scale by
operating on a global level. This allows them to reduce production costs,
improve efficiency, and offer products and services at competitive prices.
​
​ Infrastructure Development: MNCs often invest in infrastructure development
projects such as roads, ports, and telecommunications networks. This can help
to improve the overall infrastructure of a country and support long-term
economic growth.
​
​ Social Responsibility: Many MNCs have corporate social responsibility (CSR)
programs aimed at improving the communities where they operate. These
programs may include initiatives related to education, healthcare,
environmental sustainability, and poverty alleviation.

Overall, while there are certainly criticisms and challenges associated with the
activities of MNCs, their presence can bring significant benefits to both host countries
and the global economy.

DISADVANTAGES OF MNCs

Multinational corporations (MNCs) bring various advantages to the global economy,

such as job creation, technological innovation, and economic growth. However, they
also have several disadvantages, which can have significant implications for both the
countries in which they operate and the global economy as a whole. Here are some key
disadvantages of MNCs:

​ Impact on Local Economies:

● Job Displacement: MNCs may displace local businesses, leading to
unemployment and economic instability in the region. Local businesses
often struggle to compete with the resources and scale of MNCs, resulting
in closures and job losses.
● Dependency: Developing countries may become overly dependent on
MNCs, particularly in industries such as agriculture or manufacturing. This
 dependency can leave economies vulnerable to fluctuations in global
markets and MNC policies.
​ Unequal Distribution of Wealth:
● Income Inequality: MNCs may exacerbate income inequality within
countries by offering low wages to local workers while generating
significant profits for shareholders and executives.
● Profit Repatriation: MNCs often repatriate profits to their home countries,
reducing the amount of wealth reinvested in local economies. This can
hinder economic development and perpetuate poverty in host countries.
​ Environmental Degradation:
● Resource Exploitation: MNCs may exploit natural resources in host
countries without adequate environmental safeguards, leading to
deforestation, pollution, and habitat destruction.
● Carbon Emissions: The operations of MNCs, particularly in heavy
industries such as oil and gas, can contribute to greenhouse gas
emissions and climate change. Weak regulatory oversight in some
countries may exacerbate environmental damage.
​ Social and Cultural Impact:
● Cultural Homogenization: MNCs often promote Western cultural values
and consumerism, leading to the erosion of indigenous cultures and
traditions in host countries.
● Social Disruption: Rapid industrialization and urbanization driven by MNCs
can disrupt traditional social structures and ways of life, leading to social
tensions and conflicts.
​ Tax Avoidance and Evasion:
● Profit Shifting: MNCs may engage in aggressive tax planning strategies,
such as transfer pricing and profit shifting, to minimize their tax liabilities
in host countries. This deprives governments of much-needed revenue for
public services and infrastructure development.
● Tax Havens: Many MNCs establish subsidiaries in low-tax or offshore
jurisdictions to avoid paying taxes in the countries where they generate
profits, further exacerbating global inequality and undermining fiscal
sovereignty.
​ Political Influence:
● Regulatory Capture: MNCs with substantial economic power may exert
undue influence on governments and regulatory agencies, shaping policies
in their favor and undermining democracy and public interest.
 ● Resource Curse: In resource-rich countries, MNCs may exacerbate
corruption and political instability by forming alliances with authoritarian
regimes or fueling conflicts over control of natural resources.

While MNCs offer various economic benefits, addressing these disadvantages requires
effective regulation, corporate responsibility, and international cooperation to ensure
that their operations contribute to sustainable development and equitable prosperity for
all stakeholders.

MULTINATIONAL CORPORATIONS

A multinational corporation (MNC) is a company that has business operations

in at least one country other than its home country and generates revenue
outside of its home country.

● Multinational corporations conduct business in two or more countries.

● An MNC can have a positive economic effect on the countries in which it
operates.
● Investing in a multinational corporation is a way to add international
exposure to a portfolio.

Developing an international presence can open up new markets and sales

opportunities. Corporations can establish operations in markets where their
capital can be used efficiently. If they can produce the same quality of goods
at lower costs, multinational companies can reduce prices and increase the
purchasing power of consumers worldwide. Multinational companies may also
take advantage of lower tax rates in countries eager for direct investments.
A multinational corporation has business offices and operations in two or more
countries. These companies are often managed from a central office
headquartered in the home country. Simply exporting goods for sale abroad
does not make a business a multinational company.
Why Would a Business Want to Become a Multinational
Company?
Usually, the primary goal of a business is to increase profits and growth. If it
can grow a global customer base and increase its market share abroad, it
may believe opening offices in foreign countries is worth the expense and
effort. Companies may benefit from certain tax structures or regulatory
regimes found abroad.

FEATURES

(a) Giant size : The assets and sales of a multinational companies are quite
large. The sales turnover of some MNCs exceed the Gross National
Product of several developing countries.

(b) International operations : A multinational operates through a network of

branches spread across various host countries. MNCs might operate
through franchising, branches. subsidiaries, joint ventures etc in other
countries.

(c) Advanced Technology : These enterprises use sophisticated technology

in their methods of production. Technological superiority gives them an
edge over other companies in host countries. Innovative product of MNCs
conforms to international standards and quality specifications which helps
them in maximising sales and profits.

(d) Professional management : MNC's hire professional managers to

manage their huge physical and financial resources. Professional
managers with their expertise and training make optimum use of available
opportunities and encounters threats effectively.

(e) Centralised control : A MNC has its headquarter in home country, from
where it controls its branches and subsidiaries. The subsidiaries in host
countries work according to broad policies formulated by the headquarter.

(f) Marketing strategies : MNCs have aggressive marketing strategies.

They acquire major portions of market using effective marketing strategies
and attractive sales promotion techniques. Since they have already carved
out a place for themselves in the global market and their brands are well
known, selling their products is not a problem.

ROLE OF MNCs IN INDIAN ECONOMY

Multinational corporations (MNCs) play a significant role in the Indian

economy, contributing to its growth, development, and integration into the
global market. Their presence influences various sectors, shapes policies,
and impacts the overall economic landscape of the country. Here's a
comprehensive explanation of their role:

1. Foreign Direct Investment (FDI) Inflow:

MNCs bring in substantial foreign direct investment (FDI) into India, which
stimulates economic growth by creating employment opportunities,
promoting technology transfer, and enhancing infrastructure. The Indian
government has often relaxed FDI norms across different sectors to attract
more investments, and MNCs have responded by injecting capital into the
economy.

2. Technology Transfer and Innovation:

MNCs are often at the forefront of technological advancements in their
respective industries. Through collaborations, joint ventures, or
wholly-owned subsidiaries, they bring advanced technologies, processes,
and management practices to India. This transfer of technology not only
boosts productivity and efficiency but also fosters innovation within
domestic firms, leading to the overall modernization of the economy.

3. Employment Generation:

One of the most direct impacts of MNCs in India is the creation of

employment opportunities. These corporations hire skilled and unskilled
workers across various sectors, ranging from manufacturing and IT to
services and retail. The influx of jobs not only reduces unemployment but
also improves living standards and drives consumption, thereby fueling
economic growth.

4. Export Promotion:

Many MNCs in India are engaged in export-oriented activities,

manufacturing goods for both domestic consumption and international
markets. By participating in global value chains, they contribute to the
country's export earnings, thereby narrowing the trade deficit and boosting
foreign exchange reserves. Additionally, their global networks and
marketing capabilities help Indian products gain access to international
markets.

5. Infrastructure Development:

MNCs often invest in infrastructure development, either directly or

indirectly, to support their operations. This includes investments in
transportation, logistics, power generation, and telecommunications. The
improved infrastructure not only benefits the MNCs but also creates a
conducive environment for other businesses to thrive, thereby fostering
overall economic development.
6. Government Revenue Generation:

MNCs contribute significantly to government revenue through various

channels, including corporate taxes, import duties, excise duties, and other
levies. The tax revenue generated from these corporations is crucial for
funding public expenditure on infrastructure, education, healthcare, and
social welfare programs, thereby contributing to inclusive growth and
development.

7. Spillover Effects:

The presence of MNCs in India often leads to spillover effects, whereby

their activities positively impact other sectors of the economy. For instance,
the demand for ancillary goods and services, such as raw materials,
components, logistics, and marketing, creates opportunities for domestic
suppliers and service providers. This promotes the development of a robust
ecosystem of supporting industries and services.

8. Regulatory Compliance and Corporate Governance:

MNCs operating in India are typically subject to stringent regulatory

compliance requirements and adhere to high standards of corporate
governance. Their presence and adherence to global best practices often
raise the overall standards of corporate governance in the country,
promoting transparency, accountability, and ethical business conduct.

9. Market Competition and Consumer Choice:

The entry of MNCs into Indian markets often intensifies competition,

leading to greater efficiency, innovation, and product differentiation.
Consumers benefit from a wider range of choices, improved quality, and
competitive pricing. Domestic firms are compelled to enhance their
offerings and efficiency to remain competitive, thereby driving productivity
and innovation across industries.
10. Economic Stability and Resilience:

The diversified presence of MNCs across different sectors contributes to

economic stability and resilience by reducing dependence on any single
industry or market. This diversification helps mitigate risks associated with
economic fluctuations, market downturns, or sector-specific challenges,
thereby enhancing the overall resilience of the Indian economy.

In conclusion, MNCs play a multifaceted role in the Indian economy,

contributing to its growth, development, and integration into the global
market. Their investments, technology transfer, employment generation,
export promotion, and adherence to high standards of governance have
far-reaching implications, shaping the economic landscape and driving
progress across various sectors. However, it's crucial for policymakers to
strike a balance between attracting foreign investment and safeguarding
national interests to ensure that the benefits of MNC presence are
maximized while addressing any associated challenges.

SECTORS OF INDIAN ECONOMY

1. Primary Sector:

The primary sector encompasses activities related to natural resource

extraction and agriculture. It includes farming, forestry, fishing, mining,

and quarrying. Despite its declining share in GDP, the primary sector

remains significant due to the following reasons:

 ● Agriculture Backbone: Agriculture is the backbone of the Indian
economy, employing a large percentage of the population,
especially in rural areas. It provides livelihoods for millions of
farmers and supports rural economies. Additionally, it meets the
food requirements of the growing population and contributes to
food security.

● Raw Material Supply: The primary sector supplies raw materials

to various industries, including manufacturing and construction.
For instance, mining and quarrying activities provide minerals
and metals essential for industrial production, infrastructure
development, and exports.

● Source of Foreign Exchange: Agricultural and primary

commodities constitute a significant portion of India's exports.
Exporting products such as rice, wheat, spices, tea, coffee, and
cotton helps earn foreign exchange, stabilize the balance of
payments, and support economic growth.

● Environmental Stewardship: The primary sector is closely linked

to environmental sustainability. Sustainable practices in
agriculture, forestry, and fishing are essential for preserving
natural resources, biodiversity, and ecosystems, ensuring
long-term environmental health and resilience.

2. Secondary Sector:
The secondary sector comprises industries involved in manufacturing

and processing raw materials into finished goods. It includes

manufacturing, construction, and utilities. The significance of the

secondary sector lies in the following aspects:

● Industrialization and Economic Growth: The development of the

secondary sector is a hallmark of economic progress and
industrialization. Manufacturing industries add value to raw
materials, create employment opportunities, and contribute
significantly to GDP growth. They drive technological
advancements, productivity improvements, and innovation.

● Employment Generation: Manufacturing industries provide

employment to a large number of people, including skilled and
unskilled workers. The sector's labor-intensive nature absorbs
surplus labor from agriculture, alleviating rural unemployment
and poverty. Moreover, employment opportunities in
manufacturing often offer better wages and working conditions,
contributing to social development.

● Infrastructure Development: The secondary sector drives

demand for infrastructure development, including transportation,
energy, and telecommunications. Investments in infrastructure
are essential for supporting industrial growth, facilitating trade,
and improving connectivity across regions. Infrastructure
development also spurs economic activities in related sectors,
such as construction and services.
 ● Export Diversification: Manufacturing industries diversify India's
export basket, reducing dependence on agricultural
commodities. Exporting manufactured goods, such as textiles,
garments, automobiles, machinery, and electronics, enhances
export earnings, promotes trade balance, and strengthens
competitiveness in global markets.

3. Tertiary Sector:

The tertiary sector encompasses services that facilitate economic

activities and cater to the needs of individuals and businesses. It

includes retail, hospitality, finance, education, healthcare,

transportation, communication, and professional services. The

significance of the tertiary sector is as follows:

● Employment Dominance: The tertiary sector is the largest

employer in the Indian economy, accounting for a majority of
employment opportunities. It offers diverse career options
across various fields, including skilled and professional roles,
supporting urbanization, and fostering social mobility.

● Contribution to GDP: The tertiary sector is a major contributor to

GDP, reflecting the growing importance of services in India's
economic structure. The sector's expansion is driven by rising
incomes, urbanization, lifestyle changes, and the emergence of
new service-based industries, such as IT, e-commerce, and
healthcare.
 ● Quality of Life Improvement: Tertiary sector services enhance the
quality of life by meeting the needs and aspirations of individuals
and businesses. Services such as healthcare, education,
banking, insurance, and entertainment improve well-being,
promote human capital development, and foster social inclusion.

● Global Competitiveness: India's services sector, particularly IT

and business process outsourcing (BPO), has gained global
recognition for its quality, innovation, and cost-effectiveness.
Service exports contribute significantly to foreign exchange
earnings, trade competitiveness, and positioning India as a
preferred destination for outsourcing and offshoring services.

In conclusion, the primary, secondary, and tertiary sectors of the

Indian economy are interconnected and complementary, each playing

a vital role in driving economic growth, employment generation, and

development. While the significance of each sector may vary over

time, a balanced and integrated approach to economic planning and

policy is essential for leveraging the strengths of all sectors and

fostering inclusive and sustainable growth.

Explain the services provided by commercial banks.
Commercial banks provide a wide range of services aimed at meeting the

financial needs of individuals, businesses, and governments. These services are

essential for facilitating economic transactions, managing funds, and promoting

economic growth. Here are the key services provided by commercial banks:

1. Deposit Services:

Commercial banks offer various types of deposit accounts, including savings

accounts, current accounts, and fixed deposit accounts. These accounts allow

customers to deposit their money with the bank, earn interest, and access their

funds conveniently through checks, debit cards, or online banking. Deposit

services provide a safe and secure way for individuals and businesses to store

their money and earn returns on their savings.

2. Lending Services:

One of the primary functions of commercial banks is to provide loans and credit

to individuals and businesses. Banks offer a range of lending products, including

personal loans, home loans, car loans, business loans, and overdraft facilities. By

extending credit, banks help finance investment, consumption, and business

expansion, stimulating economic activity and growth. Lending services also

enable individuals to fulfill their financial goals and cope with unforeseen

expenses.
3. Payment Services:

Commercial banks facilitate domestic and international payment transactions

through various channels, including checks, electronic funds transfers (EFT), wire

transfers, and online banking platforms. They provide payment clearing and

settlement services, allowing customers to transfer money quickly, securely, and

efficiently. Payment services enable businesses to pay suppliers, employees, and

utility bills, while individuals can make purchases, pay bills, and transfer funds to

family and friends.

4. Investment Services:

Commercial banks offer investment services to help customers grow their wealth

and achieve their financial objectives. These services include mutual funds,

portfolio management, wealth management, and investment advisory services.

Banks provide access to a wide range of investment products, including stocks,

bonds, mutual funds, and insurance products. Investment services cater to both

retail and institutional clients, offering customized solutions based on their risk

appetite, investment horizon, and financial goals.

5. Foreign Exchange Services:

Commercial banks facilitate foreign exchange transactions, allowing customers

to buy, sell, or exchange foreign currencies. They provide services such as

currency conversion, remittances, foreign currency accounts, and hedging

products to manage currency risk. Foreign exchange services are essential for
international trade, travel, and investment, enabling businesses to conduct

cross-border transactions and individuals to remit funds to their home countries.

6. Treasury Services:

Commercial banks offer treasury services to manage their own liquidity, funding,

and risk. These services include money market operations, liquidity management,

asset-liability management, and risk hedging. Banks also provide treasury

products and services to corporate clients, such as foreign exchange risk

management, interest rate hedging, and derivative products. Treasury services

help optimize the bank's balance sheet, maximize returns, and mitigate financial

risks.

classification of financial institutions in India.

Financial institutions in India can be classified into various categories

based on their functions, ownership, and regulatory framework. Here's a

brief overview of the classification of financial institutions in India:

1. Banking Institutions:

Banking institutions are the backbone of the financial system in India. They

accept deposits from the public and provide loans and credit facilities.

Banking institutions in India can be classified into the following categories:

● Commercial Banks: These are banks that provide a wide range of

financial services to individuals, businesses, and governments.

Commercial banks include both public sector banks (owned and

operated by the government) and private sector banks (owned and

operated by private entities).

● Regional Rural Banks (RRBs): RRBs are specialized banks established

to provide banking services in rural areas. They are owned by the

central government, state governments, and sponsor banks

(commercial banks).

● Cooperative Banks: Cooperative banks are financial institutions

owned and operated by their members. They cater to the financial

needs of specific groups, such as farmers, artisans, and urban

consumers. Cooperative banks include urban cooperative banks

(UCBs) and rural cooperative banks (RCBs).

2. Non-Banking Financial Institutions (NBFIs):

NBFIs are financial institutions that provide banking services without

holding a banking license. They complement the services offered by

traditional banks and play a crucial role in expanding financial inclusion.

NBFIs in India include:

● Non-Banking Financial Companies (NBFCs): NBFCs are financial

institutions engaged in providing credit, leasing, hire-purchase, and

other financial services. They play a vital role in financing small and

medium enterprises (SMEs), consumer finance, and infrastructure

development.

● Microfinance Institutions (MFIs): MFIs provide financial services,

such as microloans and savings accounts, to low-income individuals

and small businesses. They focus on promoting financial inclusion

and empowering underserved segments of the population.

3. Regulatory and Developmental Institutions:

Regulatory and developmental institutions in India oversee and support the

functioning of the financial system. They include:

● Reserve Bank of India (RBI): The RBI is the central bank of India

responsible for monetary policy formulation, currency issuance,

 regulation and supervision of banks and NBFCs, and maintenance of

financial stability.

● Securities and Exchange Board of India (SEBI): SEBI is the regulatory

authority for the securities market in India. It regulates stock

exchanges, securities brokers, mutual funds, and other entities

involved in securities trading.

● National Bank for Agriculture and Rural Development (NABARD):

NABARD is a development finance institution focused on agriculture

and rural development. It provides credit and support services to

agriculture and rural sectors.

● Small Industries Development Bank of India (SIDBI): SIDBI is a

development financial institution that provides financial and

non-financial support to small and medium enterprises (SMEs) in

India.

What are the main functions of RBI?

The Government’s Banker: The Reserve Bank’s second major

responsibility is to perform as a banker, agent, or advisor to the Indian
government and the states. It conducts all of the State and Central
Government’s financial tasks and provides useful economic and financial
policy recommendations to the government. It is also in charge of the
government’s public debt.

The Banker’s Bank: The Reserve Bank provides the other commercial
banks with the same tasks that the other banks conduct for their clients.
The Reserve Bank of India provides money to those countries’
commercial banks.

The Credit Controller: The Reserve Bank of India oversees credit

generated by commercial banks. The RBI employs two ways to manage
the additional money flow in the economy. These are quantitative and
qualitative ways of controlling and regulating the country’s credit flow.
When the RBI determines that perhaps the economy possesses
sufficient money supply and could lead to inflation, it tightens the money
supply through its monetary policy.

Foreign Reserves Custodian: The Reserve Bank involves buying and

selling foreign currencies and preserves the country’s foreign currency
funds to keep foreign exchange rates constant. Whenever the supply of
foreign currency in the economy falls, the RBI sells it in the foreign
exchange market and inversely. India now maintains a Foreign
Exchange Reserve of approximately US$ 487 billion.

. Currency Issuance and Management:

The RBI is responsible for issuing currency notes and coins in India. It

manages the circulation and supply of currency, ensures the availability of

adequate currency in the economy, and maintains the integrity and security

of currency notes. Additionally, the RBI regulates the printing, distribution,

and disposal of currency to prevent counterfeiting and maintain public

confidence in the currency system.

What are the prohibited functions of RBI?

While the Reserve Bank of India (RBI) has a wide range of functions aimed

at maintaining monetary stability, fostering economic growth, and ensuring

the stability of the financial system, there are certain activities that are

explicitly prohibited for the RBI to undertake. These prohibited functions are

designed to maintain the independence, credibility, and effectiveness of the

central bank. Here are some of the key prohibited functions of the RBI:

1. Direct Lending to the Government:

The RBI is prohibited from directly financing the government by subscribing

to government securities in primary auctions or providing direct loans to

the government. This prohibition is aimed at preventing monetization of

fiscal deficits, which can lead to inflationary pressures, loss of central bank

independence, and macroeconomic instability. Instead, the government

raises funds through the issuance of securities in the primary market, and
the RBI conducts open market operations to manage liquidity in the

financial system.

2. Direct Lending to Businesses:

The RBI is not allowed to engage in direct lending to businesses or provide

loans to specific sectors or industries. Direct lending by the central bank

can distort credit allocation, undermine market discipline, and lead to

inefficient resource allocation. Instead, the RBI regulates and supervises

banks and non-banking financial companies (NBFCs) to ensure that credit

is extended prudently and in line with regulatory norms.

3. Setting Interest Rates for Specific Sectors:

The RBI is prohibited from setting interest rates for specific sectors or

industries, as it may distort market signals and lead to misallocation of

resources. Instead, the RBI sets key policy rates, such as the repo rate and

the reverse repo rate, to influence overall monetary conditions and achieve

its monetary policy objectives, such as price stability and economic growth.

Market forces determine sector-specific interest rates based on factors

such as demand and supply dynamics, risk perceptions, and market

competition.

4. Direct Investment in Private Companies:

The RBI is not permitted to make direct investments in private companies

or acquire ownership stakes in corporations. Direct investment by the

central bank can raise concerns about conflicts of interest, favoritism, and

unfair competition with private sector entities. Instead, the RBI focuses on

its core functions of monetary policy formulation, banking regulation, and

financial stability oversight, leaving investment decisions to private

investors and institutions.

5. Engaging in Commercial Activities:

The RBI is prohibited from engaging in commercial activities or operating

as a commercial bank. Its mandate is to regulate and supervise banks,

maintain monetary stability, and promote financial inclusion and

development. Engaging in commercial activities could undermine the

central bank's credibility, independence, and effectiveness in fulfilling its

statutory responsibilities.

What are the functions of the stock exchange in India?

Stock exchanges in India play a crucial role in the financial system by

facilitating the trading of securities, providing liquidity to investors, and

ensuring fair and transparent price discovery. Here are the main functions

of stock exchanges in India:

1. Trading Platform:

Stock exchanges provide a centralized platform where buyers and sellers

can trade securities such as stocks, bonds, and derivatives. Through

electronic trading systems, investors can buy and sell securities efficiently

and transparently. Stock exchanges operate regular trading sessions during

specified hours, allowing investors to execute transactions and access

market liquidity.

2. Price Discovery:

Stock exchanges facilitate price discovery by matching buy and sell orders

from investors. The interaction of supply and demand determines the

prices of securities traded on the exchange. Transparent price discovery

mechanisms, such as continuous trading and auction-based systems,

ensure that securities are traded at fair and competitive prices, reflecting

their intrinsic value and market sentiment.

3. Liquidity Provision:

Stock exchanges enhance market liquidity by providing a venue for

investors to buy and sell securities with ease. Liquidity refers to the ability

to quickly convert assets into cash without significantly affecting their

price. Stock exchanges play a crucial role in ensuring market liquidity by

attracting a diverse range of market participants, including institutional

investors, retail investors, and market makers.

4. Listing and Delisting of Securities:

Stock exchanges facilitate the listing of securities issued by companies

seeking to raise capital from the public. Companies that meet the listing

requirements of the exchange can offer their shares to investors through an

initial public offering (IPO). Listing on a stock exchange provides

companies with access to a broader investor base and enhances their

visibility and credibility in the financial markets. Conversely, stock

exchanges also facilitate the delisting of securities from trading when

companies no longer meet listing criteria or choose to go private.

5. Market Surveillance and Regulation:

Stock exchanges regulate the conduct of market participants and maintain

market integrity through robust surveillance and regulatory mechanisms.

They monitor trading activities, detect market manipulation, insider trading,

and other malpractices, and take appropriate enforcement actions to

ensure compliance with securities laws and exchange regulations. Stock

exchanges work closely with regulatory authorities such as the Securities

and Exchange Board of India (SEBI) to uphold market integrity and investor

protection.

6. Investor Education and Awareness:

Stock exchanges promote investor education and awareness to enhance

investor participation and confidence in the capital markets. They offer

educational programs, seminars, and workshops to educate investors

about various aspects of investing, including risk management, investment

strategies, and regulatory compliance. Stock exchanges also provide

access to market information, research reports, and market data to help

investors make informed investment decisions.